U.S. Jobs Numbers Way Down: What Does That Mean For The Fed?

U.S. jobs numbers for May were nearly 50,000 under consensus. Does that make a rate hike by the Fed less likely?

In this week’s episode, host Rob Cittadini, regional director, consultant relations, was joined by our Director of Client Investment Strategies Mark Eibel. The focus was on U.S. jobs and elections in Europe.

U.S. nonfarm employers added a seasonally adjusted 138,000 jobs in May. This was significantly below economists’ consensus expectations for an increase of 184,000. Eibel clearly categorized this as a disappointing number. At the same time, the U.S. unemployment rate dropped to approximately 4.3%, but Eibel explained that is because the total participation in the U.S. workforce dropped.

Does that disappointing jobs number mean the  Fed will hold off on raising interest rates at their June 14 meeting?

Eibel doesn’t think so. He said that the Fed has given clear signals that it plans to raise rates in June, in line with Russell Investments outlook of two rate hikes for the year. If these disappointing numbers continue however, it may make a September Fed rate hike even less likely.

Draghi, May and the eurozone economy

Despite these U.S. jobs numbers, Eibel said investors may be better served focusing on Europe, which continues to have positive economic data. In addition to positive data, European Central Bank (ECB) President Mario Draghi spoke this week and indicated no plans to raise interest rates in the near future.

Eibel also encouraged investors to keep an eye on the June 8 election in the UK. Prime Minister Theresa May called for this snap election because she believed her party would gain seats in parliament and strengthen her pro-Brexit position. According to Eibel, the outcome is uncertain. Eibel stated it could be a bigger story than current events in the U.S.

Watch the video now.